Pricing of Equity Indexed Annuity under Fractional Brownian Motion Model

Lin Xu, Guangjun Shen and Dingjun Yao

Abstract and Applied Analysis, 2014, vol. 2014, 1-9

Abstract:

Fractional Brownian motion with Hurst exponent is a good candidate for modeling financial time series with long-range dependence and self-similarity. The main purpose of this paper is to address the valuation of equity indexed annuity (EIA) designs under the market driven by fractional Brownian motion. As a result, this paper presents an explicit pricing expression for point-to-point EIA design and bounds for the pricing of high-water-marked EIA design. Some numerical examples are given to illustrate the impact of the parameters involved in the pricing problems.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlaaa:380718

DOI: 10.1155/2014/380718

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